Late penalties grow under new state financial management system

James M. Odato

Updated 9:07 am, Monday, November 26, 2012

State Comptroller Thomas P. DiNapoli spoke to the New York State School Boards Association at the Crowne Plaza in Albany, New York March 14, 2011on the subject of the State Budget. (Skip Dickstein / Times Union)

In the first seven months of using a new financial management system aimed at improving efficiency, state agencies have amassed nearly $1.5 million in late fees for not paying bills on time.

The interest costs for late payments are 38.3 percent greater than the same period of 2011, before the Statewide Financial System was put on line by the Budget Division and Office of the State Comptroller. State officials created the bill-paying and financial management system at a cost of $265 million.

Under it, late payments for almost every state agency are up, and some agencies that had no late payments in the past period are now facing them.

"The goal is to get to zero," said Jennifer Freeman, spokeswoman for Comptroller Thomas DiNapoli. "This is money that should be spent on other purposes." Yet from April 1 — when the SFS was activated — to Oct. 24, the state's interest payments to contractors and vendors amounted to $1,473,145, compared with $1,065,088 during the earlier period when paper and data entry was required.

Even OSC isn't able to get to on-time payments under the new system, although its staff seems to be getting the hang of it better than others are. The comptroller's late payments were $2,881 this year, compared with $10,001 for the same seven months of 2011.

Both Freeman and officials with the Budget Division say the new system is working well, although training of staff — for which the state invested substantially with consultants — has not yet resulted in mastery of SFS.

Some officials who have worked on the SFS project say part of the problem is that the Budget Division has not been giving agencies the cash needed to cover bills on time. Agencies typically have 30 days to pay in order to avoid penalties.

Budget Division officials dispute this and say the new system, which offers a single financial management option, is a vast improvement over the various processes used statewide for decades.

The Budget Division's late costs rose to $537 this fiscal year from $137 for the same period of 2011. Bigger penalties are faced by the bigger agencies: The Department of Transportation reached $105,591 in the first seven months of the new system, compared with $39,991 a year earlier under the old system; the Office of General Services paid $31,826 compared with $4,201; the State University of New York paid $107,167 compared with $71,911; the Office of Parks paid $23,741 compared with $1,627.

Several agencies that had no interest costs in 2011 are now falling behind by thousands of dollars. Only the State University Construction Fund turned things around under the new system, paying no late fees compared with $1,180 the year before. And the Assembly had no costs, compared with $81.76 for the Senate. The Executive Chamber paid $45.69 this year and nothing in 2011.

And a unit called the Statewide Financial System, which worked for years developing the new system, also fell behind. Its interest fees grew to $3,147 since its invention came to life, compared with $45 the year before.

"There has been an increase in interest paid compared to last year but this should not all be attributed to SFS," said Freeman. "There are likely a number of factors." She and DOB officials said the system has been "a success."